Journal of Leadership &

Organizational Studies
http://jlo.sagepub.com/

Encouraging Knowledge Sharing: The Role of Organizational Reward Systems

Kathryn M. Bartol and Abhishek Srivastava
Journal of Leadership & Organizational Studies 2002 9: 64
DOI: 10.1177/107179190200900105
The online version of this article can be found at:
http://jlo.sagepub.com/content/9/1/64

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Encouraging Knowledge Sharing: The Role of

Organizational Reward Systems
Kathryn M. Bartol, University of Maryland, College Park, MD
Abhishek Srivastava, West Virginia University, Morgantown, WV

This article examines the role

in

of monetary rewards

encouraging knowledge sharing

in

organizations

through four mechanisms of knowledge sharing. We

argue that the system of contributing knowledge to
databases is the most amenable to rewards
contingent on knowledge sharing behaviors because
of opportunities for the reward allocator to measure
the knowledge sharing behaviors. In the case of
formal interactions within or across teams and work
units, while rewards could be made partly contingent
on knowledge sharing behaviors as in merit pay,
rewards based on collective performance are also
likely to be effective in creating a feeling of
cooperation, ownership, and commitment among
employees. In addition, we propose that team-based
rewards and company wide incentives (profit
sharing, gainsharing, and employee stock options)
would be particularly instrumental in enhancing
knowledge sharing within teams and across work
units, respectively. In the case of knowledge sharing
through informal interactions, the key enabling
factor is trust between the individual and the
organization. In this case, the role of rewards is
indirect, that is, procedural and distributive fairness
of organizational rewards are important factors in
the development of trust. We also consider
knowledge sharing in communities of practice and
theorize that intrinsic rewards and factors that build
expertise and provide recognition are the most
appropriate

means

competence.

Finally,

of fostering feeling
we

discuss

the

of

research

implications.

Organizational knowledge has been

recognized as a valuable intangible resource that
holds the key to competitive advantage (Grant,
1996). However, Spender and Grant (1996) noted
that despite recent interest in organizationally

embedded knowledge, little progress has been

made &dquo;in understanding its anatomy and creation&dquo;
(p. 6). Researchers have argued that since
individuals are the prime movers of knowledge
creation in an organization (Nonaka, 1994),
knowledge sharing among individuals could assist
in knowledge creation at a collective level. Senge
(1990) proposed that organizational knowledge is
created through communication of individual
learning among co-workers. Similarly, Nahapiet
and Ghoshal (1998) postulated that organizational
knowledge is created as a result of the
combination and exchange of existing knowledge
among employees. Thus, given the importance of
knowledge sharing, scholars and practitioners
would be interested in identifying tools that
enhance
knowledge sharing within the
organization. Our paper examines the role of one
such mechanism, organizational reward systems,
in influencing knowledge sharing by employees.
Several organizations have introduced reward
systems to encourage employees to share their
knowledge with others. For example, Buckman
Laboratories recognizes its 100 top knowledge
sharers with an annual conference at a resort.
Lotus Development, a division of IBM, devotes
25% of the total performance evaluation of its
customer support workers on the extent of their
knowledge sharing activities (Davenport, 2002).
Though knowledge management systems have
emerged in the last two decades, employee
suggestion programs have been present for a much
longer time even though these are narrower in
focus. Typically, employees receive monetary or
non-monetary awards for their valuable
suggestions in such programs.

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65
for
certain
raises
issues
that
reward
for
knowledge
organizations
people
sharing behaviors, and we also conceptualize the
role of reward systems that do not specifically
focus on knowledge sharing but may still affect
the extent to which people share their knowledge
with others in the organization. We begin with a
discussion of what we mean by knowledge sharing
and its general linkage to rewards. We then
discuss four different mechanisms for sharing
knowledge and identify the role of reward systems
in each of the mechanisms.
Our

paper

Knowledge sharing

and rewards

Knowledge sharing

Researchers have used diverse expressions to

define knowledge. For example, Nonaka (1994, p.
15) defined knowledge as &dquo;justified true belief&dquo;.
Starbuck (1992) defmed knowledge as stock of
expertise. Elliott and ODell (1999) defined
knowledge as information in action. In the training
literature, Goldstein (1993) defined knowledge as
adequate understanding of facts, concepts, and
their relationship, and the basic foundation of
information a person needs to perform a task.
While some scholars (e.g., Huber, 1991; Nonaka,
1994) distinguish between knowledge and
information, we use the two concepts
interchangeably in line with more recent works
(Alavi & Leidner, 2001; Earl, 2001), which argue
that there is little practical utility in making a
distinction between knowledge and information.
Based on these views, we consider knowledge to
include information, ideas, and expertise relevant
for tasks performed by individuals, teams, work
units, and the organization as a whole.
Polanyi (1966) classified knowledge into two
categories: explicit and tacit. Explicit knowledge
is codifiable and transmissible in a formal
language. On the other hand, tacit knowledge is
difficult to convey in formal language and is
usually specific to an individual.
We define knowledge sharing as individuals
sharing organizationally relevant information,
ideas, suggestions, and expertise with one another.
The knowledge shared by individuals could be
explicit as well as tacit. The explicit knowledge
can be shared through verbal communication. In
his conceptualization of sharing tacit knowledge,
Nonaka (1994) suggested that the recipient could
gain tacit knowledge from the source through

socialization, observation, and apprenticeship.

Thus, for a source of tacit knowledge, the method

sharing knowledge would be giving the

recipient the maximum possible opportunity to
work alongside. Nonaka also suggested that tacit
knowledge can be communicated through the
process of extemalization whereby the knowledge
source engages in elaborate communication using
analogies, metaphors, and stories to communicate
tacit knowledge. Thus, sharing knowledge,
whether explicit or tacit, requires effort on the part
of the individual doing the sharing.
Researchers (e.g., Fisher & Fisher, 1998;
Tobin, 1998) have expressed concern that
effective sharing of knowledge among individuals
or teams may not take place in organizations.
French and Raven (1959) identified knowledge
(expertise) as a source of power, the disclosure of
which might lead to erosion of individual power,
thereby partly explaining an individuals
reluctance to share it with others. Szulanski (1996)
identified lack of motivation of a knowledge
source as an important impediment to the transfer
of best practices within an organization. Some of
the reasons, identified by Szulanski, for the
reluctance of a person to share knowledge are: fear
of losing superiority arising due to ownership of
that knowledge, perception of not being
adequately rewarded for a knowledge sharing
action, and the lack of time and resources that the
individual has to effect such a transfer. Thus,
unless the knowledge source can have a positive
response to the question, &dquo;Whats in it for me?&dquo;
knowledge sharing behavior is less likely to
happen. Therefore, in order to increase the
prospects of knowledge sharing by employees,
organizations would benefit by knowing how tools
of

such

as

reward systems

can

be effective.

Knowledge sharing is a key component

knowledge management systems (Alavi
Leidner, 2001; Earl, 2001). Based

on

of
&
the

taxonomy of

knowledge management systems

proposed by Earl, we identify four major
mechanisms for individuals to share their
knowledge in organizations: first, contribution of

knowledge to organizational databases; second,

sharing knowledge in formal interactions within or
across
teams or work units; third, sharing
knowledge in informal interactions among
individuals; and fourth, sharing knowledge within
communities of practice, which are voluntary
forums of employees around a topic of interest.

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66
Our
classification
of knowledge
sharing
mechanisms is consistent with Hansen, Nohria,
and Tierneys (1999) argument that companies
tend to emphasize either a codification strategy or
a

personalization strategy

for

knowledge sharing.

Hansen et al. gave examples of consulting firms

such as Ernst and Young that emphasize capturing
knowledge objects in databases and McKinsey
emphasizing person to person contacts for

knowledge sharing. Thus, in

scheme, whereas knowledge

our classification
contribution to a
database would fall under the codification
strategy, the other three mechanisms are variants
of the personalization strategy.
It may be noted that these knowledge sharing
mechanisms are not mutually exclusive. Even
though organizations may emphasize one over the
other, all of these systems are important for the
organization in tapping individual knowledge for
collective use.

Reward systems
Rewards could range from monetary
incentives such as bonuses to non-monetary
awards such as dinner gift certificates to awards
such as praise and public recognition that do not
have a monetary equivalent value. Rewards could
also be intrinsic, such as pleasure derived from
performing the task itself. The focus of our paper
is mainly on extrinsic rewards though we
acknowledge the situations in which intrinsic
rewards are of primary importance. For the
purpose of our discussion, and in order to use a
uniform metric, we consider only the monetary
rewards for their effect on knowledge sharing. We
consider two sets of complementary factors on
which rewards could be contingent: first,
knowledge sharing behaviors and second,
outcomes other than knowledge sharing, such as
performance. Thus, we include in our discussion
the monetary awards that are contingent on
knowledge sharing behaviors and incentives that

contingent on performance at individual,

group, and organization levels.
Bartol and Locke (2000) identified several
important aspects of organizational reward
systems that are useful for motivating individuals
to perform the targeted behaviors. These factors
include, but are not limited to, perceived fairness
of rewards, employees setting challenging goals in
are

order to achieve the attractive rewards, and

practices that insure that employees possess high

self-efficacy for performing the tasks.

In order that

reward systems meet these criteria and are

effective, two basic prerequisites are that it should
be possible for the reward giver to observe or
record the target behavior and to assess its value.

Rewards

contingent on knowledgesharing: can they work?

examine different kinds of rewards

contingent on knowledge sharing, it is
important to know if such rewards will help at all
in encouraging individuals to share their
knowledge. This question becomes relevant
because the proponents of cognitive evaluation
theory (Deci & Ryan, 1985) have argued that
extrinsic rewards (e.g., monetary awards) will
have a negative impact on intrinsic motivation.
Briefly, the argument is that intrinsic motivation-that is, being motivated to perform a task because
of the inherent enjoyment derived from doing that
task--is based in the feeling of self-determination
and competence realized by the individual.
In the case of extrinsic rewards contingent on
engaging in or completing a target behavior, the
individual would perceive the locus of causality of
behavior as external and so, the feeling of selfdetermination would be undermined thereby
reducing intrinsic motivation. However, extrinsic
rewards can also convey a signal affirming
competence of the individual that has a favorable
impact on intrinsic motivation. Thus, because of
these competing forces, it is not easy to predict the
outcome of extrinsic rewards on intrinsic
motivation. Indeed, several meta-analyses of past
research on this subject have been done and the
most recent ones by Deci, Koestner, and Ryan
(1999) and the rejoinder by Eisenberger, Pierce,
and Cameron (1999) highlight the existing
controversy on this topic. Deci et al. (1999) found
that rewards contingent on the completion of a
behavior had an overall negative effect on free
choice behavior, but no effect on individuals
interest in the task. On the other hand, in a metaanalysis of studies that measured selfdetermination, Eisenberger et al. (1999) found that
extrinsic rewards had a positive effect on feelings
of self-determination that is beneficial for intrinsic
motivation.
The intrinsic motivation is argued as a
propellant of individual creativity (Amabile,
1993). The relationship between creativity and

Before

that

we

are

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67

knowledge sharing is theorized as follows. In the

case of knowledge sharing, the focus is on sharing
new and relevant ideas whether generated by
oneself or acquired through routine activities or
borrowed from ones social network. Creativity,
on the
other hand, focuses mainly on the
generation of ideas. Thus, the discussion on
creativity is relevant to the extent that if extrinsic
rewards hamper creativity, knowledge sharing
might also be reduced to the extent that people
may not be able to generate
ideas.

as

many creative

Research by Amabile (1993) suggests that

forms of extrinsic motivation can be
combined in a synergistic or additive way with
intrinsic motivation to enhance prospects for
creativity. Such synergistic extrinsic motivators
offer feedback about the individuals competence
and the value of the individuals outcomes, but do
so
without undermining feelings of selfdetermination or unduly constraining the way in
which the work is to be done. She argues extrinsic
motivation fosters relatively straightforward
applications of technical knowledge. While the
generation of novel ideas will sometimes be
important in tapping the expertise of individuals in
organizations, arguably the sharing of known
technical information is of considerable value in
many instances (Darr, Argote, & Epple, 1995). In

particular

either case, it appears possible to apply rewards in

ways that support rather than undermine intrinsic
motivation in behalf of knowledge sharing.

contributions to databases
The first mechanism for knowledge sharing is
one in which employees contribute their ideas,
information, and expertise to a database. Xerox
developed a system called Eureka in which
photocopier maintenance engineers could
contribute any ideas that helped in improving
machine maintenance practices. After verification
of these ideas, they became a part of the database
through which engineers all over the world could
use this knowledge (Brown &
Duguid, 2000).
Xerox has observed gains by promoting
knowledge sharing within the company through
this mechanism. In one anecdotal illustration, the
company described how an engineer in Brazil was
about to replace a high-end color machine (at a
cost of about $40,000) for a dissatisfied customer.

Knowledge

Experimenting with a prototype of Eureka, the

knowledge sharing system of Xerox, he found a

tip from a technician in Montreal that led him to

simply replace a defective 50-cent fuse instead and
solve the problem. In all, Eureka is estimated to
have saved the corporation $100 million (Brown
& Duguid, 2000).
There is

anecdotal evidence to suggest

have
been rewarding people for
companies
knowledge sharing through this mechanism. For
example, Cap Gemini Ernst & Young makes merit
pay decisions partly on the basis of the knowledge
sharing activities of its employees. On a scale
from 2 to 5, employees cannot score more than 3
points if they have not participated in knowledge
sharing activities (Stevens, 2000). Similar
practices exist at Lotus Development division of
IBM and Buckman Laboratories (Stevens, 2000).
While there is no research to the best of our
knowledge on whether such rewards are effective,
we
argue that the system of knowledge
contribution to a database is particularly suited to
rewards contingent on knowledge sharing
behaviors. Thibaut and Kelley (1959) and Blau
(1964) were some of the early researchers to
differentiate social interactions based on social
exchange versus economic exchange. Both forms
of exchange are based on the expectation of
with
individual
returns
commensurate
contributions. The main difference is in terms of
how clearly the exchange is defined and in what
way one obtains return for ones contribution. In
the case of economic exchange, it is easier to
quantify and exchange the contributions for the
receipts and so, the system can work on a quid pro
quo basis. On the other hand, in the case of social
exchange, there is no standard currency of
exchange. We argue that knowledge contribution
to a database is toward the economic end of the
continuum of exchange relationship between the
employer and employee. Williamson (1981)
recognizes that one of the important factors that
facilitates market exchange is the ability to
measure the value of the services provided by an
independent contractor. If there is a measurement
or &dquo;metering&dquo; problem, the activity is more
efficiently carried out internally under the
hierarchical governance or, as discussed above, is
more suited to social exchange arrangements.
Using the same logic, we argue that in the case of
knowledge contribution to databases where
measurement is comparatively much easier (as
compared to informal knowledge sharing, for
example), it would be possible for organizations to
that

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some

68
take into account the discrete transactions (i.e.,
specific events of knowledge sharing) to reward

employees suitably.
In case of knowledge contributions to a
database, knowledge shared by an individual is
recorded in the first place. Secondly, as in the case
of Xerox, there is

system of validation of

knowledge before it becomes part

of the database.
That is, a small group of experts evaluates the
ideas for their relevance. Thus, it is possible for
organizations to measure the worth of the
knowledge that is shared and make decisions on
the rewards accordingly. For example, Cap
Gemini Ernst & Young measures the value of
knowledge contributed in the database on the basis
of how many people use that knowledge.
Indeed, the modem knowledge databases are
similar to the conventional employee suggestion
programs in the sense that the basic idea in both
the systems is that employees contribute what they
know that can help the organization. In both the
systems, there could be guidelines as to what the
employees can contribute and what becomes
accessible to other employees to benefit from.
Thus, it is quite likely that if organizations, based
on evaluation of the shared knowledge, give
rewards for contributions of employees to
databases then it will have a positive effect on the
extent of knowledge sharing by individuals.
Proposition 1: Rewards contingent on
knowledge sharing will have a positive effect on
the extent of knowledge that individuals contribute
to databases. This is because of the relative ease
with which the organization can record and
measure the value of the knowledge that has been
shared.
It is, of course, important that the value of the
reward is related to the worth of the knowledge
that is shared in order to ensure equity (Adams,
1965). As to the question of how high the value
should be, an interesting situation arises when an
individual possesses knowledge of strategic
significance and the organization aims to make the
individual share it. For the purpose of our
discussion, we assume that the objective of
organizations as well as individuals is to maximize
monetary returns, there are no constraints for
employees to change organizations, and
individuals are well informed about the worth of
their knowledge.
Spender (1996) gives the example of an R&D
scientist who discovers something valuable for the

organization. The individual can walk out of the

organization and could possibly help the
competitors. The reward needed to induce the
scientist to share this knowledge would equal the
value of that knowledge in the best alternative use
outside the organization. The organization would
attain competitive advantage due to such
knowledge only if such knowledge is firmspecific, that is, it is of more value in the current
organizational context than in any other
organization. Otherwise, the price paid (in the
form of rewards) to capture such knowledge may
neutralize any competitive advantage the
organization could derive.
For example, firm specific knowledge is what
a person may have acquired by interacting with
finn-specific assets (e.g., a specialized group of
machines

that are not present in other

organizations) and so, has limited use with the
assets used by other companies. Another example
of firm-specificity of knowledge is that R & D
know-how might require effective production and
marketing in order to achieve the desired returns
and, even though other companies would benefit
from the R & D know-how, the current location of
the knowledge will give the highest return due to
its superior production and marketing capabilities.
Thus, the organization would be in a position to
pay the individual what the knowledge may be
worth outside and still make a gain on the
transaction.
Obviously, numerous other factors
influence pay decisions in such instances. For
example, even if we assume that the value of
knowledge could be known to both parties, it is
important to note that not all individuals are
working toward maximizing monetary utility all
the time (Argyris, 1973; Maslow, 1970). However,
our purpose was to illustrate that rewards can be
effective in such knowledge sharing situations and
to identify an extreme situation in which the cost
of rewards could be prohibitively high.

KNOWLEDGE SHARING IN FORMAL

INTERACTIONS
A second mechanism for knowledge sharing
is formal interactions. These could take place
within teams or work units or across people
working in different teams, departments, divisions,
etc. For example, teams and departments may hold
periodic meetings in which the leader seeks the

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69

input of employees. In such cases, there are some

options regarding whether knowledge sharing is
rewarded at the level of the individual, the team,
or across

teams/work units.

Individual level rewards

In the case of formal meetings of teams and
work units, it is possible to reward individuals for
their knowledge sharing behavior because the
leader has the opportunity to evaluate the
contributions made by individuals over a period of
time. Thus, knowledge sharing behaviors could be
one of the criteria in performance evaluation, and
decisions on merit pay and promotions could be
related to the extent of knowledge sharing by
individuals in formal interactions. Bonuses might
be possible, but they tend to be more appropriately
tied to specific outcomes or linked to special

accomplishments.

may, in fact, perceive knowledge sharing behavior

to be detrimental to self-performance. On the other

hand, team metrics have the advantage of fostering

cooperation and coordination and motivating
group members to focus on group goals and
performance (Dulebohn & Martocchio, 1998).
It may be noted that team incentives may also
suffer from the problem of free riding (Gerhart,
Minkoff, & Olsen, 1995). However, as Lawler
( 1971 ) argued, there could be a positive effect on
individual perceptions of instrumentality if the
belief is that individual behavior will facilitate
cooperation and coordination, which, in turn,
would lead to improvement in collective
performance. On balance, we would expect
individuals to believe that their knowledge sharing
behavior helps others in improving performance
and it might also develop a sense of cooperation
and reciprocity in which everyone shares

Unless a manager is actually part of the team,

it will typically be more difficult to evaluate ongoing knowledge sharing at the team level for
purposes of allocating rewards. One potential
solution is to institute peer ratings, perhaps as part
of a 360 degree performance appraisal. These
additional information mechanisms may make it
possible to reward knowledge sharing behavior
within teams and across teams/work units.
Proposition 2: Merit pay plans that include
assessment and explicit recognition of knowledge
sharing will have a positive effect on extent to
which individuals share knowledge within and
across teams and work units.
While rewarding individuals for knowledge is

knowledge thereby improving team performance.

Past research has indeed argued and empirically
found support for the positive relationship between
knowledge sharing and team performance
(Durham, Knight, & Locke, 1997; Faraj &
Sproull, 2000; Lewis, 1999). Thus, team-based
rewards are likely to encourage knowledge sharing
by individuals within teams assuming individuals
perceive the linkage between their knowledge
sharing behavior and team performance, and

potential approach to encouraging knowledge

sharing, another approach is to foster knowledge
sharing at the team level.

Rewards

one

rewards.

Proposition 3: Rewards based

performance
likely
sharing within teams.
are

across

the
businesses or
In

case

to enhance

on

team

knowledge

teamslwork-units
of

diverse
in several countries, there

companies

with

operations
advantages to be gained by sharing knowledge
between businesses or subsidiaries (Gupta &
Govindarajan, 2000a). The role of rewards has
been recognized in such companies and systems
are

Rewards at the team level

At the team level, it may be

possible to
knowledge sharing through indirect
rewards-that is, rewards that are contingent on
factors other than knowledge sharing, but which
are likely to require knowledge sharing for
successful performance. For instance, when
outcomes such as performance are rewarded at the
individual level, an individual who shares
knowledge with others may be likely to think that
the knowledge he/she shares will improve the
performance of others rather than his/her own
performance. Since knowledge sharing behavior
involves effort away from the task, an individual
encourage

that
reward
heads
of
business
divisions/subsidiaries on the basis of performance
of the firm as a whole (e.g., profits) or that of a
large number of clusters, as opposed to just the
individual units performance, have been
empirically found to be more effective in
encouraging knowledge sharing (Gupta &
Govindarajan, 1986; Pitts, 1974). Similarly, in
Nucor Steel, plant general managers tend to share
their best practices with one another because their
bonuses depend not only on the performance of

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70

their individual plants, but also on the basis of

performance of the entire company (Gupta &

Govindarajan, 2000b).
Durham and Bartol (2000) argue that a likely
limitation of profit sharing plans is that they do not
establish a clear link between individual behavior
and its impact on profits. However, if a link does
exist between individual knowledge and profits,
such reward systems can be effective. For
example, as a person goes up in hierarchy, the
perceived link between ones behaviors and
company profits may strengthen. Profit sharing
could
facilitate
individuals
sharing their
knowledge for the benefit of the organization as a
whole and for teams (e.g., consulting project
teams) sharing knowledge with one another.
An area that relates to profit sharing is
gainsharing, a compensation plan in which an
organization shares with employees a portion of
the added earnings obtained through their
collective increases in productivity (Henderson,
1997). Gainsharing plans have been in existence
for more than hundred years (Welboume &
Gomez-Mejia, 1995) and typically include the
whole organization or a significant portion.
Welboume and Gomez-Mejia (1995) presented
eleven different theoretical perspectives on why
gainsharing might lead to the contribution of ideas
by employees in a work unit. Authors also cited
several studies that found a positive effect of
introduction of gainsharing on productivity.
Gainsharing programs, such as Scanlon and
Rucker plans, have specific provisions for
employee involvement in terms of contribution of
suggestions and a committee giving awards to
employees with valuable ideas (Welboume &
Gomez-Mejia, 1995), even though the main focus
of the plans is on group level rewards.
Another type of pay for performance plan
operating at the organizational level that is likely
to have a positive effect on knowledge sharing is
employee stock ownership. Lawler, Mohrman, and
Ledford (1995) found that 71 percent of Fortune
1000 companies had stock ownership programs of
some kind or the other. Employee stock option
plans are one of the most popular forms of stock
ownership, which gives employees the choice to
purchase a specific amount of stock at a particular
price over a period of time. The underlying
premise is that employees will be more involved in
the long-term success of the organization. In a
long-term relationship, a temporary mismatch

between ones contributions and rewards is

accommodated as the person hopes to balance the
two over a period of time. On the other hand, a
short-term relationship is likely to set up a quid
pro quo attitude in which the individual, in
general, would want immediate monetary
incentives or knowledge reciprocated by someone
else.
Pierce, Rubenfeld, and Morgan ( 1991 ) argued
that employee stock option plans are likely to
develop a sense of ownership in employees. In an
empirical study of construction companies, Van
Dyne and Pierce (1993) found that psychological
ownership arising due to stock ownership led to
increased organizational commitment. This sense
of ownership and commitment is likely to be
particularly effective in motivating individuals to
share complex knowledge when a quid pro quo
arrangement may not be possible due to greater
time and effort involved in sharing.
There could be several situations in
organizations where the nature of knowledge that
is being shared is complex, meaning it is difficult
to codify or communicate or it takes a long time
and great effort for the source to transmit and the
recipient to absorb that knowledge. Typically,
such knowledge tends to be tacit in nature. An
example of such situations could be a senior R&D
scientist mentoring a new scientist on firm-specific
technology or a new technology in its nascent
stage. Another example could be one top manager
grooming a successor. It might require long
periods of observations and discussions by the
successor. The person who shares the knowledge
not only has to set aside the time and spend effort
that could possibly be a distraction from the
current job on hand, but also it is possible that this
source of knowledge may feel a sense of losing his
or her worth in the organization because the
unique knowledge that this person possessed is
now being
shared with other persons. The
commitment to the organization and a sense of
ownership, fostered in part by employee stock
option plans, is likely to be useful in encouraging
such knowledge sharing behaviors.
Proposition 4: Profit sharing plans will have a
positive effect on knowledge sharing across teams
and work units.
Proposition 5: Gainsharing plans will have a
positive effect on knowledge sharing across teams
and work units.

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71

Proposition 6: Stock ownership plans

suited to motivate

particularly
their complex knowledge.

employees

are

to share

As in the earlier case of knowledge sharing

within teams, in the case of formal interactions
across teams and work units, it might be possible
to monitor the knowledge sharing behavior and
include this criterion in individual evaluations.
Multinationals and diversified companies may
hold conferences where managers of various
divisions may present their best practices, in the
presence of top managers, for everyone to share.
While opening a new subsidiary in a foreign
country, managers of other countries in that region
may be directed by the global company head
office to share their expertise and experience in
helping the new subsidiary take off. The corporate
head office may have sources of monitoring such
behaviors on the basis of feedback received from
the managers of the new subsidiary, for example.

the other hand, in the case of social exchange

where people make contributions beyond what is
included in their job descriptions, it is important
that people trust that the organization will
reciprocate in some form or the other in the long

run (Homans, 1961).

We

that rewards contingent on

knowledge sharing will be less effective in the
case
of social exchange because discrete
transactions may not be identifiable within the
context of formal reward systems. Instead, there
may be a sequence of mutually beneficial
behaviors among two or more actors (Molm et al.,
2000). As Masterson et al. (2000, p.739) argued,
&dquo;standards for measuring contributions are often
unclear&dquo; in transactions based on social exchange
and so, rewards contingent on such behaviors may
be less effective.
Several scholars (e.g., Hedlund & Nonaka,

argue

1993; Nonaka, 1994; Zand, 1981) also recognized

the

KNOWLEDGE SHARING IN INFORMAL

INTERACTIONS
Earl

(2001) gives examples of companies

McKinsey and American Express that
knowledge directories in which employees
are
identified for their areas of expertise.
Organizations hope that these experts share their
knowledge when other employees approach them.
Informal sharing also includes informal watercooler chats. The important characteristic of

such
have

as

informal interactions is that communication is

usually not recorded and the contributions are
more difficult to evaluate. Thus, these behaviors
fall more toward the social exchange end of the
continuum of exchange relationships between the
employer and the employee.
Social exchange refers to reciprocal acts in
which individuals offer help or information to one
another &dquo;without negotiation of terms and without
knowledge of whether or when the other will

reciprocate&dquo; (Molm, Takahashi, & Peterson, 2000,

p.1396). Thus, such exchanges are marked with
risk as to what and when the returns of ones
contributions will be. Accordingly, Molm et al.
(2000) argued that trust, defmed as an expectation
that an exchange partner will behave benignly,
plays a more important role in reciprocal
transactions than in economic exchange where
terms and conditions are known in advance and
may even be guaranteed by the organization. On

importance of inter-personal trust in teams and

organizations for creating an atmosphere in which
people shared knowledge. Jassawala and Sashittal
(2000) recommended that effective leaders of new
product teams should be open and honest in
communication thereby establishing interpersonal
trust. Several scholars have recognized that trust
can
enable cooperative behavior (such as
knowledge sharing) among individuals (Axelrod,
1984; Mayer, Davis, &
Schoorman, 1995;
McAllister, 1995).. In such situations, rewards
could still play an indirect role in enhancing
knowledge sharing in informal interactions
through fostering the development of trust
between the employer and the employee.
Lind and Tyler (1988) argued that procedural
fairness is an important source of trust in the
employee-supervisor relationship. Fair procedures
are likely to inculcate individual trust in systems
(Brockner & Siegel, 1997). Several researchers
(e.g., Alexander & Ruderman, 1987; Konovsky &
Pugh, 1994; Tyler & Degoey, 1996) have found
procedural justice and trust to be highly related. If
a
supervisor is perceived as following fair
procedures in giving rewards to an individual for
contributions made to the organization, the
individual is likely to believe that in the future
also, the supervisor will protect his/her interests.
According to the group value effects model of
procedural justice (Greenberg, 1990), fair
procedures convey a signal to employees that the
organization values them and this may prompt

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72

them to respond with organizational citizenship

behaviors (OCB) that could include sharing
knowledge with co-workers so as to help them.
Consistent with these arguments, perception of
procedural justice has been recognized as an
important antecedent of OCB (Deluga, 1994;
Konovsky & Organ, 1996; Konovsky & Pugh,
1994; Wayne & Green 1993).
Leventhal (1976) argued that managers who
allocate rewards could build a reputation as being
trustworthy if they have been honoring the past
commitments. Thus, ensuring fair outcomes to
team members is an important way of establishing
trust. Robinson and Morrison (1995) argued that
employees have a tendency to avoid helping
behaviors
when their
employer provides
inadequate outcomes, in accordance with Adams
(1965) equity theory. The authors argued that
employees beliefs about the extent to which their
organization has fulfilled its obligations to them
would affect their prosocial behaviors, such as
knowledge sharing in informal interactions within
the organization.
Proposition 7: Procedural and distributive
fairness of rewards will influence the level of trust
in the organization, which, in turn, will affect the
extent to which individuals engage in prosocial
behaviors such as knowledge sharing in informal
interactions.

COMMUNITIES OF PRACTICE
The last mechanism of knowledge sharing
that we consider is the establishment of
communities
of practice
(COP) wherein
within
an
employees
organization communicate on
of
their
in a non-routine, personal,
interest
topics
and unstructured system (Earl, 2001). Earl gives
the example of BP Amoco for this type of a
system. Being an informal structure, COP may
also extend beyond organizational boundaries. In a
typical electronic COP, participants ask questions,
give responses to the questions posted by others,
and initiate discussions on topics that might
interest the virtual community. Brown and Duguid
(1991) argued that the presence of such
communities in organizations is vital to
innovation. Similarly, Lave and Wenger (1991)
asserted that such communities simultaneously
produce practically useful outcomes for customers
as well as for participants. Accordingly, it may be

advantageous

for

organizations

to

provide

technological support for COP so that knowledge

that is not captured through databases could
emerge in interactions among people tied by
mutual interests (Faraj & Wasko, 2002).
Constant, Sproull, and Kiesler (1996) raised
the question &dquo;why should someone respond to a
request for help from a stranger when the
likelihood of direct personal benefit is low?&dquo;
(p.121). In their study of COP at Tandem
Computers Inc., Constant et al. found that
employees who participated in COP were
motivated by organizational citizenship. Faraj and
Wasko (2002) found two reasons responsible for
knowledge contributions by individuals in COP.
First, participants want to create relationships with
others who have similar interests and second,
participants are driven by the need for actualizing
their potential, learning, and advancing the
community.
It is somewhat difficult for the organizations
to reward knowledge sharing behavior in COP
settings because these are informal arrangements
among participants, although they may be nurtured
and supported by the organization in various ways.
To some extent, it may be possible to acquire
information about a particular employees
contributions through peer information, anecdotal
information regarding instances in which a
participants advice was instrumental, and reports
of a COPs activities. However, given the reasons
why employees participate and consistent with job
characteristics theory (Hackman &
Oldham,
it
is
that
the
most
effective
means
of
1980),
likely
COP
will
focus
encouraging
knowledge sharing
heavily on creating conditions that foster intrinsic
motivation, such

as

the nature of the work

Oldham), and promoting feelings of

competence through such means as helping
participants build expertise and providing
recognition. For example, although the World
Bank does recognize COP involvement through its
performance evaluation system, the Bank depends
mainly on intrinsic motivation associated with
COP membership, such as the opportunity to work
on interesting ideas and build relationships with
colleagues to encourage knowledge sharing
(Wenger & Snyder, 2000).
(Hackman

&

Proposition 8: Intrinsic rewards and factors

expertise and feelings of competence are

that build

appropriate for influencing knowledge

behavior
within
organizational
sharing
communities of practice.

most

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73

DISCUSSION
Our main motivation in

developing

the

arguments here is the growing realization that

knowledge sharing within organizations is a

critical process affecting
knowledge creation,
organizational learning, and performance
achievement. While knowledge sharing behavior
has been attributed to causal factors ranging from
individual dispositions to wider phenomena such
as organizational culture (see Argote, 1999, for a
review), the lack of emphasis on considering the
potential impact of rewards has been surprising,
particularly considering the fact that rewards are
present in virtually all organizations. Our analyses
begins to fill this void in the literature. Building on
the work of Earl (2001), we propose four major
mechanisms of knowledge sharing. These
mechanisms

reflect

the

codification

and

personalization strategies proposed by Hansen et

al. (1999). We also have examined the effects of
two broad categories of rewards, the ones that are
contingent on knowledge sharing behaviors and
others that are contingent on factors such as
performance.
The
first
mechanism,
knowledge
contributions to databases enables the knowledge
sharing behaviors to be recorded, and several
organizations that seek to codify knowledge also
attempt to validate that knowledge (Liebowitz,
1999). Considering the factors that are useful for
designing and administering effective reward
systems (Bartol & Locke, 2000), we argue that
two helpful prerequisites, recording and measuring
the knowledge shared by individuals, are met in
the case of knowledge contributions to databases.
Accordingly, rewards contingent on knowledge
sharing are likely to be appropriate.
According to our conceptualization, in the
case of knowledge sharing in formal interactions,
the reward allocator (e.g., team leader) is likely to
be able to observe or track the knowledge sharing
behaviors of individuals. Thus, it might be
possible for the organization to allocate a certain
weight to the knowledge sharing behaviors of
individuals as part of their performance appraisals
and for supervisors to evaluate the individuals on
this dimension. However, knowledge sharing will
also be influenced by incentives based on group
performance. Team-based rewards can foster
cooperation among team members, and also, the
individuals involved are likely to consider their

knowledge sharing behaviors as instrumental in

achieving the team-based rewards. Similarly, for
knowledge sharing across teams and work units,
company-wide incentives such as gainsharing,
profit sharing and employee stock options will
help in encouraging knowledge sharing. Employee
stock options are particularly likely to encourage
individuals to share knowledge that is high in
complexity. This is because stock ownership is
likely to engender organizational commitment and
ownership that will be important in influencing the
individual to spend the time and effort sharing
complex knowledge.
The

knowledge
knowledge
not easily

third

mechanism we consider is
sharing in informal interactions. Since
sharing behaviors in this context are
measured, it is difficult to make the

rewards
behaviors.

contingent on knowledge sharing

However, rewards can still be
contingent on knowledge sharing behaviors
observed over a period of time by ones colleagues
because organizations can seek feedback from
multiple sources on this dimension as in 360
degree appraisal systems. We argue that, for the
most part, employee contributions of knowledge in
informal interactions will be based on the premise
of social exchange, where quid pro quo
arrangements may not be possible-at least in the
short run. Consistent arguments and findings in the
social exchange literature have been that trust is a
major facilitator of social exchange transactions.
Rewards also play a role in such a knowledge
sharing mechanism in the sense that the perceived
fairness of reward systems will assist in the
development of trust between an individual and
the organization.
Finally, we consider the emerging role of
communities of practice in organizations. Since
this mechanism is frequently nurtured, but not
controlled by the organization, formal reward
systems have a lesser role to play. Previous
research by Constant et al. (1996) and Faraj and
Wasko
(2002) indicates that individuals
participating in COP activities are motivated by
factors such

organizational citizenship, selfactualization, learning, and advancement of the

community. Thus, communities of practice
as

represent the scenario where monetary rewards

may be less useful and what might matter is the
intrinsic motivation of individuals. Helping
participants build expertise and providing
recognition may constitute added encouragement.

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74

hope our paper is interpreted as a call for

future empirical research on the role of rewards in
knowledge sharing because the current evidence
the effectiveness of rewards is -mainly
on
anecdotal (the gainsharing research is an important
exception) and our knowledge of this field would
be substantially enriched by additional empirical
results. Field studies may be complemented by
laboratory experiments that substantiate causality
and the role of intervening processes such as
cooperation, commitment, ownership, and trust
that we discussed. Experimental studies on
knowledge sharing in team settings (e.g., Stasser
& Stewart, 1985) have largely ignored the role of
We

team-based rewards.
For practicing managers, our paper suggests
that rewards are important for most mechanisms of

knowledge sharing. We provide guidelines

regarding which rewards are likely to be most
effective with each of the four mechanisms. Of
course, simply introducing the rewards will not
achieve their intended results unless basic
guidelines for the effective use of rewards, such as
clear goals, rewards of value, and sufficient
employee self-efficacy (Bartol & Locke, 2000)
are also followed.

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